Insurance Policies and Contracts Flashcards
7 cards from real CU practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Insurance Policies and Contracts flashcards as text
The doctrine of 'reasonable expectations' in insurance contract interpretation holds that:
Answer: Courts honor the objectively reasonable expectations of the insured even if policy language is ambiguous
The reasonable expectations doctrine protects insureds by enforcing what an ordinary person would reasonably expect the policy to cover, especially when exclusions are hidden or complex.
Under the 'other insurance' clause, when two policies cover the same loss and both contain a 'pro rata' provision, losses are shared:
Answer: In proportion to each policy's limit relative to the total insurance
Pro rata other insurance clauses divide the loss between insurers in proportion to the amount each policy would independently pay.
A 'non-renewal' notice by an insurer differs from a 'cancellation' notice in that non-renewal:
Answer: Occurs at the end of the existing policy term rather than mid-term
Non-renewal means the insurer declines to continue coverage when the current policy period expires, while cancellation terminates an in-force policy before its expiration date.
Which element distinguishes an 'insuring agreement' from an 'exclusion' in a standard insurance policy?
Answer: The insuring agreement broadly grants coverage; exclusions narrow or eliminate specific covered claims
The insuring agreement defines the scope of coverage granted, while exclusions carve out specific risks, situations, or types of damage that the insurer will not cover.
The 'named insured' on a commercial policy has rights that 'additional insureds' typically do not, including the ability to:
Answer: Cancel the policy or receive return premiums
Only the named insured holds full contractual rights such as cancelling the policy, receiving premium refunds, and making changes to coverage terms.
Which provision allows a property insurer to take over the insured's legal rights against a negligent third party after paying a loss?
Answer: Subrogation
Subrogation transfers the insured's right to sue a negligent third party to the insurer after the insurer has compensated the insured for the loss.
A 'manuscript policy' in commercial insurance refers to a policy that is:
Answer: Individually drafted or customized to meet a specific insured's unique coverage needs
A manuscript policy is a custom-written policy negotiated between the insured and the insurer to address risks or coverage terms not available in standard forms.